Policy Documents

Research & Commentary: National Flood Insurance Update

September 8, 2011

On Thursday, September 8th, the Senate Banking, Housing, and Urban Affairs Committee held its first formal markup of a bill to reauthorize the National Flood Insurance Program. The program, which has not had a long-term authorization in half a decade, has serious problems. While originally designed to be self-sustaining, the program currently owes the Treasury more than $17 billion and has no practical way to ever pay it back. In addition, while many of the program’s founders promoted it as a way to promote wetlands conservation, it has, in fact, provided a subsidy for the development of wetland areas.

The following articles address some of these concerns and examine the national flood insurance debate from a free-market perspective.

Watery Marauders: How the Federal Government Retarded the Development of Private Flood Insurance
http://www.heartland.org/Article.cfm?artId=22839
Eli Lehrer of The Heartland Institute examines the development of NFIP and its negative effects on the growth of private flood insurers.

Subsidizing Disaster
http://www.ncpa.org/pub/ba/ba525/
Christy Black of the National Center for Policy Analysis examines the National Flood Insurance Program (NFIP) and danger of subsidizing home construction in flood-prone areas.

GAO Report Slams FEMA Management of National Flood Insurance Program
http://news.heartland.org/newspaper-article/2011/06/20/gao-report-slams-fema-management-national-flood-insurance-program  
This article from The Heartlander Magazine discusses a recent Government Accountability Office report that criticizes the Federal Emergency Management Agency's management of the NFIP.

Moral Hazard in Action: Who Insures Against Floods and Why?
http://www.heartland.org/Article.cfm?artId=7574
John Hood of Consumer's Research examines how NFIP can skew the perception of flood risk, inducing homeowners to build in flood-prone areas, with disastrous results.

Congress to Mull Major Reforms to National Flood Insurance Program
http://news.heartland.org/newspaper-article/2011/04/25/congress-mull-major-reforms-national-flood-insurance-program  
This article from The Heartlander examines several measures that Congress will be considering to reform, or even eliminate the debt-ridden National Flood Insurance Program (NFIP).

FEMA's Unnatural Disasters: Is Katrina the beginning of a trend?
https://www.reason.com/news/show/34996.html
Ronald Bailey of Reason comments on the role of NFIP in the aftermath of Hurricane Katrina, criticizing the subsidization of homebuilding in historically flood-prone areas.

Confessions of a Welfare Queen: How rich bastards like me rip off taxpayers for millions of dollars
http://www.reason.com/news/show/29067.html
John Stossel critically comments on NFIP and its subsidization of coastal homebuilding in risky areas, a housing market dominated by the wealthy. Stossel portrays NFIP as a gift to the rich and its recipients as wealthy "welfare queens."

Research & Commentary: Windstorm Expansion of the National Flood Insurance Program
http://heartland.org/policy-documents/research-commentary-windstorm-expansion-national-flood-insurance-program
This Research & Commentary from The Heartland Institute examines from a free-market perspective the proposed expansion of NFIP through the addition of windstorm coverage.

Federal Flood Insurance: The Repetitive Loss Problem
http://fas.org/sgp/crs/misc/RL32972.pdf
This report, written by the Congressional Research Office, outlines the evolution of NFIP and examines the repetitive loss problem of the program, the primary cause of its costs overruns.

Research & Commentary: Flood Mitigation, Levees, and Flood Maps
http://heartland.org/policy-documents/research-commentary-flood-mitigation-levees-and-flood-maps  
This Research & Commentary examines the role of levees in flood mitigation, the importance of accurate flood mapping, and the effects of maps changes on flood insurance.